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Sat, 01 November 2014 17:42:11
Sri Lankan banks urged to borrow abroad
02 Nov, 2011 17:31:31
Nov 02, 2011 (LBO) - Sri Lanka's banking regulator has urged banks to borrow abroad using improved credit ratings and precedents set by sovereign bonds as local savings were inadequate to raise funds needed to maintain high growth.
Central bank governor Nivard Cabraal said economic growth has begun to accelerate with the end of the island's 30-year ethnic war in 2009 but it would be tough to maintain the pace without external funding and investment.

"It's not easy to maintain eight percent-plus growth continuously for four or five years," he told a bank directors’ symposium organised by the regulator and attended by around 200 chairmen, directors and chief executives of 33 licensed banks.

"We have, for the first time in our history, been doing it for two years in succession. It's going to be tough and needs clear interventions," he said.

Cabraal said the island's macro-economic fundamentals had improved with lower inflation, interest rates, budget deficits and unemployment, making it more attractive for investors.

"Our credit ratings have improved and we're working towards moving Sri Lanka towards investment grade in the next few years so we will be around the 'BBB' mark by 2015-16," Cabraal said.

"Now there's a fantastic opportunity for all of you to use the momentum established by the government with its bond issues.

"In the last few years when the central and finance ministry team went on road shows abroad to persuade global investors to invest in Sri Lanka we always said the private sector will follow.

"But I'm afraid that has not happened," Cabraal told the forum.

"What has happened is that the government established a benchmark and there is a clear reduction in interest rates. But that momentum has not been used by the private sector. You need to make use of it."

Cabraal said confidence in Sri Lanka's economy was still high.

"We still have a window of opportunity for Sri Lanka and we need to make use of it. We must continue to aim at our high growth path.

This meant adopting a new approach and new proactive measures as far as banks are concerned with greater reliance on international financing.

"The high growth can't only be sustained with savings we have in Sri Lanka. Now we must see you going to international markets, lobbying for new funding, if we are to sustain this growth," Cabraal said.

"You have fantastic balance sheets. The rating has to be leveraged to make use of it to bring funds into the country.

"The rating must be relevant, not just locally, but to the person in Boston, Japan and Singapore. They must feel comfortable in investing in your bank. That's how you test your balance sheet."
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READER COMMENT(S)
5. neville Nov 03
Too much of corruption at every level. Cost of production in srilanka not competitive with other countires, besides very low quality.
4. Len Nov 03
Every one in the planet got two bits waiting in line to pore money in to Sri Lanka. Name one other country in the world has preformed better in the financial sector. Its truly is miracle of Asia and soon to be miracle of the Planet.
3. Niro Nov 03
The way things are moving, we are gonna become another 'Greece' 5-10 years time!
2. FTC Nov 03
How can you invest in Sri Lanka, when you see what's going on the Govt., ministers shooting each other in broad day light, the Shooter a Drug Lord,

This is a country of Gangster Politicians with no law

Now investors have to beware oof aware what you bring in will be nationalized too.

1. Concerned Nov 03
Sorry Sir,
As your government bonds are debts owed to the world plus interest payable. The Rp is pegged to the US dollar at an enormous cost to the country,to make the figures work out,hence prices are rising beyond the so say 6/7% pa so say inflation you ask banks to borrow more money?